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5 Reasons Businesses Fear AT&T's T-Mobile Merger

A law firm seeks to block AT&T's merger with T-Mobile by calling on AT&T customers to seek arbitration. Here's a look at the top merger worries.

Robert Strohmeyer

August 15, 2011

3 Min Read

AT&T this week is fighting back against a law firm that has been rounding up AT&T customers to seek arbitration and block the company's acquisition of T-Mobile. This development shines a stark light on the prospect of combining the two wireless companies, resurfacing fears among competitors and customers alike. Here are five basic reasons why many business customers are worried an AT&T/T-Mobile merger.

1. Reduced Competition Could Distort Pricing

The most obvious potential problem with an AT&T acquisition of T-Mobile is that it would take a major player out of the United States wireless market. The expected outcome of such a move is that customers would have fewer options in the marketplace, reducing carriers' incentive to offer competitive pricing plans. In particular, T-Mobile has earned a reputation as a cheaper alternative to AT&T and Verizon, and its absence from the market may eliminate some of the most affordable business plans around.

2. Data Service Woes

AT&T's data service has had its ups and downs in recent years, with the lows drawing significantly more attention than the highs. The company has developed a poor reputation among wireless data users, particularly those who rely on wireless hotspot connections for business. While T-Mobile itself generally isn't regarded as a standard-bearer in data performance, adding those customers to AT&T's already massive population of data customers could be a worrisome proposition for users on both networks. AT&T is reportedly already working to sell some $8 billion in network assets as part of the deal.

3. More Handset Lock-Ins Could Reduce Options

Once a company signs on with a given wireless carrier, it's not easy to switch, and that makes handset exclusivity a problem for business customers. In a recent letter to the FCC and the Department of Justice, Senator Al Franken of Minnesota raised concerns that the deal could worsen the existing problem of handset exclusivity if AT&T and Verizon rule 82% of the U.S. wireless market.

4. Roaming Restrictions

Franken and other opponents of the merger also have raised concerns that an enlarged AT&T could hurt smaller, regional wireless carriers, many of which carry the last-mile connection to areas underserved by the larger carriers' own networks. If those carriers fail, business travelers in rural areas could lose connectivity.

5. Threat to Backhaul Providers

Some of the most vocal opposition to the merger comes from within the wireless industry itself. Not just from direct competitors, but from telecom companies that work with carriers to provide the network infrastructure. These backhaul companies mostly serve smaller carriers, but they're responsible for building out much of the U.S. mobile infrastructure. If AT&T squeezes them out, they argue, it would create a duopoly in the industry that could further hurt end users.

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